Zale Corp. to cut 200 positions, close 105 stores this year

Published 6:00 pm, Tuesday, February 26, 2008

Jewelry retailer Zale Corp. said Wednesday it will close more stores and cut 20 percent of its headquarters staff to save more than $65 million a year.

The company said it would close another 23 stores, bringing to 105 the number it expects to shutter by the end of July. That would leave about 2,145 stores and kiosks under several brands including Zales Jewelers and Piercing Pagoda.

Zale added it would lay off 140 people and eliminate 140 unfilled positions at its headquarters in suburban Dallas. Most of the $4 million in severance-related and other costs will be recorded in the company's fiscal third quarter, which ends April 30.

Zale also will cut capital spending from an expected $85 million in 2008 to $45 million in fiscal 2009, and reduce inventory by $100 million.

Shares jumped $2, or 11.2 percent, to $19.93 in midday trading.

Zale has struggled through weak holiday seasons, constant flux in strategy and several changes in leadership in recent years. The company is also facing signs of a slowdown in spending by middle-class consumers, Zale's key demographic.

Last week, the company reported that profit fell 31 percent in its most recent quarter and that same-store sales, a key measure in retailing, declined a sharp 7.3 percent.

New Chief Executive Neal Goldberg said the company must create "a culture of cost discipline and financial rigor." He said the cuts were difficult but important steps.

Last week, Goldberg said that the company's marketing "is not good enough" and that the stores' pricing strategies have confused customers. His turnaround plan involves reducing $100 million in excess inventory and making the stores more appealing to price-sensitive customers.

Zale recently sold the Bailey, Banks & Biddle chain, which was more upscale than its other chains, which also include Gordon's Jewelers, Peoples Jewellers and Mappins Jewellers.